Best Practices When Terminating an Underperforming Employee

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RIAs rely on talented employees to help them grow their businesses. Unfortunately, there may come a time when an advisor must make the difficult decision to terminate an underperforming employee. While this is never an easy task, it is essential for RIAs to tread carefully to avoid employee lawsuits. In this article, I will explore the best practices that RIAs should implement to reduce liability when preparing to terminate an underperforming employee.

The best way for RIAs to avoid having to terminate an underperforming employee is avoiding hiring such a person in the first place. For an article discussing five common mistakes RIAs make when hiring employees, please click here.

Here are the 10 steps to take before termination:

1. One of the foundational steps in reducing liability with respect to employee terminations is to prepare employment agreements for employees to sign that clearly outline the firm’s expectations, including clear descriptions of the employee’s roles, responsibilities, and time commitment as well as the reasons employees may be terminated. These agreements often also lay out what employees will be entitled to if they are let go for reasons out of the employee’s control (without cause) or for reasons due to the employee’s underperformance or bad conduct (with cause). For an article highlighting best practices and common mistakes when preparing employment agreements, please click here.